Single-Family Homes in Minnesota Continue to Lose Value … Yet Property Taxes Rise
There may or may not be a real estate bubble in Ramsey County - but there’s no denying this Minnesota housing market is losing some serious air.
Need proof? Tax statements that hit mailboxes this week show that as many single-family homes in St. Paul lost assessed value as gained value for 2007, according to a county report.
It’s the first such widespread decline county officials said they can remember. In each of the previous four years, nine of 10 homes in the city gained value, a Pioneer Press analysis found.
The numbers mark a sea change for residential real estate, which makes up almost three-quarters of the nearly $50 billion worth of assessed property in Ramsey County. The declines also parallel stagnating middle-class incomes, along with the changing fortunes of the Minnesota mortgage business.
The news came in the mail for people such as Phyllis Folta, who lives on East Third Street in St. Paul. Like nearly all of her neighbors, she saw the assessed value of her home slip by thousands of dollars on the tax statement she got this week — while her property taxes went up 17 percent.
After more than a decade of steady rises in her home’s value, she noticed the change immediately and cited the decline from memory when asked.
“I have the statement right here by my phone,” she said. “I was hoping the county would send something, some kind of explanation.”
County assessor Stephen Baker cited a number of factors in the change:
- Real estate investors have been pulling out of the market as homes easy to “turn around” have become scarcer
- First-time home buyers may be sitting on the sidelines and waiting for the market to bottom out
- Tightening credit may be putting more homes on the market and winnowing the number of home mortgage borrowers with the wherewithal to buy them.
“It reflects some uncertainty in the market that we saw,” Baker said. He said actual sale prices alternately led assessments, trailed assessments and switched back and forth during the last year. “It looks like the market is stagnating, and this is where the models told us to go.”
It didn’t produce a precipitous drop in value, either, because the total value of residential property in the county still managed to rise 0.1 percent, excluding improvements.
And county officials note a small upside to the change: The gap between taxable and market values is shrinking, years ahead of the statutory phase-out of the state’s “limited market value” law. This stumble in values may avert some nasty tax surprises in coming years.
“The other thing that’s happening here is the affordability index is improving,” Baker said. “This is giving wages a chance to catch up a little with home prices and may bring more buyers into the market.”
But that’s small consolation to existing homeowners. While 48 percent of them saw their value decrease, just 6.6 percent got a break on their property taxes after excess school levies in Mounds View and the St. Paul housing market were factored in, according to county tax analyst Chris Samuel.
“I’d thought we were overvalued as it was,” said Roy Wendt, a retired Ramsey County accountant who lives with his wife, Delores, in the home they built in 1950, just south of the Ford Motor Co. plant in Highland Park. He said the “for sale” signs on his street seem to indicate a slump.
“There’s no way our house was going to sell for what it was assessed for,” he said. “This is a little more reasonable … but then my taxes went up 16.4 percent anyway.”
SOURCE: The Pioneer Press